PROBLEM 22

Chloe Glenn Company acquired P6,000,000, 5-year bonds with a stated rate of 10% on January 1,

2020. The bonds were acquired to yield 8%. Interest is payable annually on December 31. At the end

of the reporting period, the bond yields as follows:

December 31, 2020 - 9%

December 31, 2021 - 11%

December 31, 2022 - 10%

Requirements:

1. Prepare the necessary journal entries to record the above transactions assuming the investment

is classified as trading security? Investment at FVTOCI? Investment at amortized cost?

2. Compute the unrealized holding gain or loss of the investment, assuming the investment is

classified as trading security? Investment at FVTOCI? Investment at amortized cost?

3. How much is the carrying value of the investment at each reporting period assuming the

investment is classified as trading security? Investment at FVTOCI? Investment at amortized

cost?

PROBLEM 23

Adrian Henry Company purchased P2,000,000, 12%, 4-year bonds at 102, excluding the interest on

April 1, 2020. The interest is payable on February 1 and August 1. At the end of each year, the bonds

have the following quoted price:

Dec. 31, 2020 - 102 1/2

Dec. 31, 2021 - 101 3/4

Dec. 31, 2022 - 103 1/4

On February 1, 2023, Adrian Henry sold half of its bonds to the market at 102 3/4.

Requirements:

1. What is the journal entries to record the above transactions assuming the investment

is classified as trading security? Investment at FVTOCI? Investment at amortized cost?

2. Compute the unrealized holding gain or loss of the investment, assuming the investment is

classified as trading security? Investment at FVTOCI? Investment at amortized cost?

3. How much is the carrying value of the investment at each reporting period assuming the

investment is classified as trading security? Investment at FVTOCI? Investment at amortized

cost?

PROBLEM 24 (Adapted)

On January 1, 2020, Aierella Ivy Corporation purchased serial bonds with a face value of P3,000,000

and a 12% stated interest payable annual every December 31. The bonds are to be held as a financial

asset at amortized cost with a 10% effective yield. The bonds mature at an annual installment of

P1,000,000 every December 31.

Requirements:

1. Compute the purchase price of the bonds.

2. Prepare the necessary journal entries to record the transactions. Show your amortization

schedule.

3. How much is the investment in bonds on December 31, 2020?

PROBLEM 25

Lord Corporation acquired bonds with a face value of P3,000,000 for P2,800,000 on January 1, 2020.

The bond has a stated interest of 10%, pays interest every December 31, and matures on December

31, 2022.

Requirements:

1. What is the journal entries to record the above transactions.

2. How much is the investment in bonds on December 31, 2020?

3. Assuming that the bond is a serial bond and the P1,000,000 matures every December 31.

Prepare the journal entries to record the transactions.

4. The same information in No. 3, how much is the investment in bonds on December 31, 2020?

PROBLEM 26 (AICPA Adapted)

On January 1, 2020, Aguilar Corporation purchased bonds with a face value of P4,000,000 for

P3,649,600 in order to collect contractual cash flows that are solely payments of principal and interest.

The bonds are purchased to yield 10% interest. The nominal interest rate on the bonds is 8% payable

annually every December 31.

On December 31, 2021, as a result of a change in the business model for managing financial assets,

the entity decided to reclassify the bonds from amortized cost to fair value. On that date, the carrying

amount of the bond investment is P3,744,016 after discount amortization using the effective interest

method. The market value of the bonds on January 1, 2015, is 10%.

Requirements:

1. What is the journal entries to record the transactions.

2. Using the same information, except that the change is from fair value to amortized cost, prepare

the necessary journal entries to record the transactions.

3. What if, initially, the investment is classified at FVTPL, then subsequently changed it to

FVTOCI, prepare the necessary journal entries to record the transactions. Assume that the bond

is for 5 years on the date of acquisition.

PROBLEM 27

Gonzales Company acquired a P5,000,000, 5-year bond on January 1, 2020, for P4,620,000. The stated

rate on the bonds is 8% but acquired to yield at 10%. The interest payment is collected annually every

December 31. On December 31, 2020, the financial asset suffered impairment. The bond at this time

yields 16%.

Requirement:

1. Prepare the necessary journal entry.

PROBLEM 28 (AICPA Adapted)

Miraflores owned 10,000 shares in Maquiling Company acquired several years ago at P100 per share

to be held as a long-term investment. Beginning in 2015, Miraflores received a dividend of P40 per

share. Maquiling Company notifies the investor that a portion of this amount represented earnings

and the balance as liquidating dividends. The allocation to be made as follows:

Earned Dividend Liquidating Dividend

2015 - P40

2016 P10 P30

2017 P15 P25

2018 P20 P20

2019 P25 P15

Requirements:

1.What is the journal entries on the books of the investor from 2015 to 2019.